( 81 )
PODISINGHO APPUHAMY «. LOKUSINGHO et al.
D. G., Negombo, 3,294.
Prescription—Actio Pauliana—Accruing of cause of action—Ordinance No. 22of 1871, s. 11.
No action of a creditor, claiming a declaration that the deed oftransfer made by his debtor in favour of the defendants be declaredfraudulent and void, can be maintained, unless the same be commencedwithin three years of the accruing of the cause of action.
In such a case, the cause of action arises when it becomes clear thatthe effect of the deed will be to defraud creditors. It does notnecessarily arise at the time of the execution of the deed.
It arises after all the rest of the property of the debtor not includedin the impeached deed has been exhausted by executors, when itbecomes quite certain that unless the deed is set aside there will not bethe means of satisfying the debts.
HE facts of. this ease are as follows:—The plaintiff institutedan action No. 2,385 in the Court of Requests of Negombo in
July, 1894, against one Migotchihamy, the mother of the first,second, and fourth defendants, for the recovery of a certain sum
July 5 and 9.
( 82 )
July 5 and 9.
of money alleged to be due on a promissory note, and obtainedjudgment on the 9th May, 189.5. He then caused the Fiscal tosieze and sell Migotchihamy’s interest in two lands, and himselfbecame the purchaser thereof on the 29th August, 1895. Heobtained a conveyance from the Fiscal on the 30th Novemberfollowing. During the pendency of the action No. 2,385, Migotchi-hamy conveyed her interest in the two lands subsequentlypurchased by the plaintiff to the first, second, and fourth defend-ants, by deed dated 31st January, 1895. In regard to this deedplaintiff alleged that there was no consideration, and that it was.,executed by Migotchihamy in collusion with the first, second, andfourth defendants with the view of preventing the plaintiff fromrecovering the debt due by Migotchihamy. He prayed, that thedeed be declared fraudulent and void in respect of the landspurchased by him at the Fiscal’s sale on the 29th August, 1895.
The present action was filed on 30th November, 1898.
The issues settled by Court were these:—
First-,—Was the deed of 31st January, 1895, executed in fraudof creditors ?
Second,—Is plaintiff’s action barred by prescription undersection 11 of Ordinance No. 22 of 1871?
As regards the first issue, the District Judge held that the deedwas executed in fraud of plaintiff.
And as regards the second issue,, he held as follows:—“ The action“ does hot fall under any of the heads mentioned in the sections“ preceding section 11 of the Ordinance No. 22 of 1871, and should“ have commenced within three years as laid down in section 11“ from the time the cause of action accrued. Defendant’s counsel“ urged that the cause of action accrued on the 9th May, 1895,“ the date of the decree in case No. 2,385, for at that time plaintiff“ was aware of the execution of the impeached deed by his debtor," and not on the 29th August, 1895, the date of the sale .by the** Fiscal of the lands in question. With this contention I am“ unable to agree. Plaintiff could not claim to be entitled to" those lands till after he had obtained the Fiscal’s transfer. It“ was only after he had obtained the transfer and had been“ prevented by the defendants from taking possession of them that“ his cause of action accrued. The present action was instituted“ on the 30th November, 1898. The Fiscal’s transfer is dated 30th“ November, 1895. I hold that the action is not prescribed.”
He therefore entered decree for plaintiff.
( 83 )
Wendt, Acting A.-O., for appellant.—The cause of actionarises as soon as creditor discovers that he was injured (Voetad Pand, XLII. 8, 13). Plaintiff says that the impeached deedof conveyance comprises all the property of the judgment-debtor,and that he knew of the alienation. The reckoning of the dateshould commence from the date of the deed of conveyance.Plaintiff sues as purchaser, and not as creditor. Qua purchaser,he has no right to bring this action. [Bonsek, C.J.—Who canbring the actio Pauliana? Only a creditor (Voet, XLII. 8, 3.]Yes, only a credifor. Debt is the foundation of the action.[Bonser, C.J.—If a defrauded creditor succeeds to the right, title,and interest of the fraudulent debtor, he cannot maintain anaction to set aside the previous deed.]
H. Jayawardana, for plaintiff, respondent.—The present actionis a rei vindicatio. Plaintiff first brought a partition suit, and wasthen referred to another action. The cause of action here is thefraud of the debtor. Conveyances by persons in pecuniarydifficulties will not be supported as against creditors, unless theyare free from suspicion of fraud. Komali v. Appuhamy (78. 0. C. 73). [Bonser, C.J.—Supposing a third party bought thisland at the Fiscal’s sale, what would have been the cause ofaction ? He only bought the interest of the judgment-debtor,which turns out to be nothing.] Plaintiff says that the judgment-debtor did not divest herself of her title by the deed in question.
Wendt, in reply.—Section 284 of the Civil Procedure Codeenables the plaintiff to apply to the District Court by petition toset aside the sale* on the ground that the judgment-debtor had nosaleable interest in the property sold. If the debtor had otherproperty, the creditor should realize it all and then take steps to setaside the deed, but such an actio Pauliana would be prescribedunder section 11 of Ordinance No. 22 of 1871 in three years.The time is to be computed from the date of the deed. In May,1895, plaintiff knew that the judgment-debtor had no propertyleft to be discussed.
The plaintiff is the purchaser at a Fiscal’s sale of the interestof his debtor in certain lands which had before the sale beentransferred by the debtor to the defendants under circumstanceswhich, the plaintiff alleges, show that the alienation.was fraudulent,as being intended to defraud the debtor’s creditors. The convey-ance was made on the 81st January, 1895. The debtor was thenindebted to the plaintiff in the sum of Bs. 75. The plaintiff
July 6 and 9.
( 84 )
1900. recovered judgment for that sum and costs, amounting togetherJuly 6 and 9.f0 j^8 JQ5. It is proved that the plaintiS at the time he recovered
Bonseb, C.J.this judgment was aware of this transfer, and was also aware that
it comprised the whole of the property of his debtor, and thatapart from this property the debtor had nothing wherewith tosatisfy his debt, so that it seems to me that if (as the DistrictJudge found) the deed was made without consideration, it wasundoubtedly fraudulent as against the debtor’s creditors. Theplaintiff, however, did not, as he might have done, bring a Paulianaction to get this transfer set aside, but he pointed out part of theproperty comprised in the transfer to the Fiscal as being thedebtor’s property, and had it seized and put up for sale, althoughthe transferees were in possession. They did not put in a claim,and I understand that it has been held by this Court that thetitle of a true owner is not affected by his abstaining from makinga claim. The sale was accordingly proceeded with, and theplaintiff became the purchaser of the property for the sum ofBs. 85.
He appears to have made a very good bargain; for it is nowalleged that the property which he purchased for Bs. 85 is worthBs. 300. He did not obtain possession of his purchase, and afteran ineffectual attempt to do so by instituting a partition suit,which was dismissed, he on the 30th November, 1898, broughtthe present action, in which he claimed a declaration that thedeed of transfer be declared to be fraudulent and void. Thatis the ordinary prayer in a Paulian action. It is not necessary todecide whether a purchaser at a Fiscal’s sale is competent to bringa Paulian action, because the plaintiff in the present case was stilla creditor, the execution having failed to realize the full amountof his debt, and it might be contended that the action could besupported on that ground.
But the defendants raised the defence that the action wasprescribed. Section 11 of Ordinance No. 22 of 1871 provides that“ no action shall be maintainable in respect of any cause of action“ not hereinbefore expressly provided for, or expressly exempted“ from the operation of this Ordinance, unless the same shall be“ commenced within three years from the time when such cause“ of action shall have accrued.” These Paulian actions are notspecially mentioned in the Ordinance, and they therefore fallwithin the three years’ prescription. The question arises then,When did the cause of action accrue in the present case? Voet(XLI1. 8, 13) deals with this question, and he lays down therule that it arises at the time when it is clear that the effect ofthe deed will be to defraud creditors. It does not necessarily
( 85 )
arise at the time of the execution of the deed, because non constatthat the deed will affect creditors; but he says that it arises afterall the rest of the property of the debtor not included, in theimpeached deed has been exhausted by execution; when itbecomes quite certain that unless the deed is set aside there willnot be the means of satisfying the debts. In the present case, asI mentioned before, it was certain at the date of the deed, inas-much as it comprised the whole of the debtor’s property, that itseffect would be to defraud her creditors, and it is proved that onthe 9th May, 1895, the creditor, the plaintiff in this case, hadknowledge of that fact. It seems to me that from that date, atall events, the time began to run as against him, and that theaction is prescribed. The District Judge held that the time didnot begin to run until the plaintiff got the Fiscal’s transfer onthe 30th November, 1895. But I must say that I cannot followhis reasoning. I cannot understand how the time can beextended by the fact that the purchaser at the Fiscal’s saledelayed to obtain a transfer of the property purchased.
July 5 and 9.Bonseb, C.J.
PODISINGHO APPUHAMY v. LOKUSINGHO et al